Are you able to make additional repayments on your home loan?

Alex Sperling
on
December 15, 2023

Make Additional Repayments On Your Home Loan

Implementing the strategy of making additional repayments on your home loan can prove to be a clever move from a financial perspective.

By investing any additional funds you have into your home, you have the potential to accelerate the life cycle of your loan while also reaping the long-term financial benefits of saving money.

However, it is important to exercise caution and carefully plan for additional repayments while also selecting the appropriate loan type that accommodates them.

The importance of reducing the principal balance of a loan cannot be overstated, as it directly leads to a decrease in the interest paid over the entire loan term, making extra repayments more than just a moment of self-congratulation. Utilizing them can result in significant savings of money. By making extra repayments, it is possible to reduce the term of a 30-year loan by half, resulting in significant savings of hundreds of thousands of dollars.

As time goes on, the majority of borrowers will likely discover that their earning potential increases throughout their professional journeys. When your cash flow increases, having the flexibility to pay more towards your home loan can provide a stronger hold on financial freedom. Therefore, it is crucial to carefully evaluate the type of loan that would be most suitable for you if you plan on making additional repayments in the future, as not all loans provide this option.

Its generally true that almost every basic variable or variable rate product will have the flexibility to accommodate extra repayments.

While it is possible to make additional repayments on a fixed term loan, it is important to note that there are typically additional restrictions that come with it.

There are certain fixed rate loans that offer the option of additional repayment. However, it is important to note that most fixed rate loans do not allow any redraw facility.

If you have intentions of paying more than your monthly minimum on your home loan, it is strongly recommended to incorporate extra repayments into your loan structure. This will help to prevent any unexpected break fees that may cause inconvenience.

It is of utmost importance to have a thorough discussion with your finance broker about your future plans, as this will help determine if the loan product you select can accommodate all your goals.

The best approach is for the broker to inquire about the client’s specific purposes for the loan and their needs in relation to the loan.

When selecting a home loan that enables you to make additional repayments, it is crucial to consider your other financial obligations as well.

For example, if you have another debt that is accumulating a higher interest rate, it would be more financially advantageous to prioritize paying off that debt sooner. Additionally, it might be beneficial for you to completely eliminate a separate debt in order to enhance your cash flow.

It is crucial to take these factors into account because opting for a variable rate home loan could potentially result in higher costs if you fail to make additional repayments due to other more urgent financial obligations.

When all is said and done, the crucial aspect to take into account is the loan’s structure. It is important for you to have the ability to facilitate your financial goals.

Pro Options Lending Solutions is available to help you explore loan options that are tailored to your current needs as well as your future plans.

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